nep-int New Economics Papers
on International Trade
Issue of 2010‒10‒16
sixteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Labor Market Institutions, Firm-specific Skills, and Trade Patterns By Heiwai Tang
  2. Austrian Exporters: A Firm-Level Analysis By Johannes Pöschl; Robert Stehrer; Roman Stöllinger
  3. Non-homothetic preferences, parallel imports and the extensive margin of international trade By Reto Foellmi; Christian Hepenstrick; Josef Zweimüller
  4. Financial development and trade: evidence from the world's three largest economies. By Resiandini, Pramesti
  5. The impact of the emergence of China on Brazilian international trade By Enestor Dos Santos; Soledad Zignago
  6. The Uneven Roles of FTAs: Selection Effect or "Learning" Effect? By Faqin Lin
  7. Factor Immobility and Regional Impacts of Trade Liberalization Evidence on Poverty from India By Petia Topalova
  8. India's Intra- Industry Trade Under Economic Liberalization: Trends and Country Specific Factors By Veeramani C
  9. Trade Union Membership and Dismissals By Laszlo Goerke; Markus Pannenberg
  10. Taking stock of antidumping, safeguards, and countervailingduties, 1990-2009 By Bown, Chad P.
  11. Are All Trade Protection Policies Created Equal? Empirical Evidence for Nonequivalent Market Power Effects of Tariffs and Quotas By Bruce Blonigen; Benjamin Liebman; Justin Pierce; Wesley Wilson
  12. Protection for Free? The Political Economy of U.S. TariffSuspensions By Prachi Mishra; Anna Maria Mayda; Rodney D. Ludema
  13. Entry dynamics and the decline in exchange-rate pass-through By Christopher Gust; Sylvain Leduc; Robert J. Vigfusson
  14. Milestones of European Integration: Which matters most for Export Openness? By Hiller, Sanne; Kruse, Robinson
  15. The Quality and Variety of Exports from New EU Member States: Evidence from Very Disaggregated Data By Konstantins Benkovskis; Ramune Rimgailaite
  16. Exports,growth and causality. New evidence on Italy: 1863-2004 By Barbara Pistoresi; Alberto Rinaldi

  1. By: Heiwai Tang
    Abstract: This paper studies how cross-country differences in labor market institutions shape the pattern of international trade, focusing on workers' skill acquisition. I develop a model in which workers undertake non-contractible activities to acquire firm-specific skills on the job. In the model, workers have more incentive to acquire firm-specific skills relative to general skills in a more protective labor market. When sectors are different in the dependence on these two types of skills, workers' skill acquisition turns labor laws into a source of comparative advantage. By embedding the model in an open-economy framework with heterogeneous firms, sectors with different levels of dependece on firm-specific skills, and countries with varying degrees of labor protection, I show that countries with more protective labor laws export relatively more in firm-specific, skill-intensive sectors through both the intensive and extensive margins of trade. I then estimate returns to firm tenure for different U.S. manufacturing sectors over the period of 1974-1993, and use the estimates as sector proxies for firm-specific skill intensity to test the theoretical predictions. By implementing the Helpman-Melitz-Rubeinstein (2008) framework to estimate sector-level gravity equations for 84 countries in 1995, I find supporting evidence for the predicted effects of labor market institutions on both margins of trade.
    Keywords: Labor market institutions, heterogeneous firms, margins of trade, trade patterns, firm-specific skills
    JEL: F10 F12 F14 F16 L22 J24
    Date: 2010
  2. By: Johannes Pöschl (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw); Roman Stöllinger (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: In this paper we provide detailed evidence on the importance and performance of exporters compared to non-exporters in Austrian manufacturing industries based on firm-level data. The centrepiece of the study is the issue of the export premium, i.e. the size and performance advantages of exporting firms compared to their purely domestic peers. We find evidence for the existence of large export premia for all seven size and performance premia considered. These results are largely in line with the results found for other European countries. When estimating the export premium at the level of individual industries, we find significant differences with respect to the magnitude of the export premia. Significant export premia are still found when controlling for other firm characteristics such as employment and R&D-related variables where we find lower but more plausible magnitudes for the size and performance premia of exporters. We further test the robustness of the export premium results using random and also fixed effects estimators. The random effects model delivers statistically significant export premia for all measures as well. Care has to be taken when interpreting the estimated coefficients in the firm fixed effects model as the coefficients signal differences in size and productivity for 'export switchers', i.e. firms changing their export status. Finally we employ a probit model to investigate the impact of past firm characteristics on the probability to export. The major result is that while lagged firm productivity and size matter, the most important factor influencing this probability is the past export status pointing to a strong persistence of exporting.
    Keywords: exports, firm heterogeneity, export premium, Austrian manufacturing firms
    JEL: F14 L25
    Date: 2010–07
  3. By: Reto Foellmi; Christian Hepenstrick; Josef Zweimüller
    Abstract: We study international trade in a model where consumers have non-homothetic preferences and where household income restricts the extensive margin of consumption. In equilibrium, monopolistic producers set high (low) prices in rich (poor) countries but a threat of parallel trade restricts the scope of price discrimination between countries. The threat of parallel trade allows differences in per capita incomes to have a strong impact on the extensive margin of trade, whereas differences in population sizes have a weaker effect. We also show that the welfare gains from trade liberalization are biased towards rich countries. We extend our model to more than two countries; to unequal incomes within countries; and to more general specifications of non-homothetic preferences. Our basic results are robust to these extensions.
    Keywords: Heterogenous markups; non-homothetic preferences; parallel imports; extensive margin of trade
    JEL: F10 F12 F19
    Date: 2010–07
  4. By: Resiandini, Pramesti
    Abstract: This paper examines the relationship between financial development and trade based on panel data of bilateral trade between the world's three largest economies (United States, Japan, and Germany) and 47 partner countries over the period 2003 to 2007. Access to loans for businesses has a strong positive relationship with bilateral trade. Access to the local equity market raises trade with less developed countries, but lowers trade with developed countries. The study also finds that international financial indicators are significant determinants of trade.
    Keywords: Financial development; International trade flows; Gravity model
    JEL: F15 G1 F14
    Date: 2010–10–03
  5. By: Enestor Dos Santos; Soledad Zignago
    Abstract: We take advantage of a novel dataset that incorporates both the technological content of each product as well as its quality to unveil some new features of Brazil-China’s trade flows and to challenge the view that the emergence of China would imply the deindustrialization of Brazilian exports. The trade between the two countries builds on exports of commodity goods from Brazil to China and of manufactured products from China to Brazil. Looking at the technological dimension of the dataset we show that Brazil (increasingly) exports to China products with lower technological content and (increasingly) imports products with higher technological content. The quality dimension of the dataset reveals that both countries export to each other basically low-quality goods (i.e. products whose unitvalue are in the lower range of world’s distribution of unit-values for the product). We then show that the overlapping between Brazilian and Chinese total exports is limited and that the degree of competition between the two countries is relatively small. We also show that the number of products in which the two countries have comparative advantage declined in the last years and that in the last years both countries increased their advantage in the products in which they already had advantage in 1994 and lost advantage in the sectors in which they had small advantage in producing in 1994. Available data analyzed in this paper evidences that in the last years Brazilian exports of commodity products increased significantly due to the emergence of China and other Asian countries. We show, however, that Brazilian exports of high technological content and high quality increased more than the average and more than low technological and low quality exports in the last years. Overall, the emergence of China has been supporting a displacement of Brazilian exports not only towards naturalbased products but also to goods with higher quality and higher technological content.
    Date: 2010–09
  6. By: Faqin Lin (School of Economics, University of Adelaide)
    Abstract: Previous studies on the role of FTAs in promoting members' international trade have usually focused on FTA premium, ignoring the difference between selection effects - trade developments before the formation of FTAs - and "learning" effects - trade growth after the formation of FTAs. This paper considers this difference, using a large bilateral trade panel comprising data covering more than 50 years from 178 countries. South–South FTAs and North–South FTAs are most related to the selection effect while North–North FTAs have a significant "learning" effect.
    Keywords: Free trade agreements, selection effect, learning effect
    JEL: F10 F13 F15
    Date: 2010–10
  7. By: Petia Topalova
    Abstract: This paper uses the 1991 Indian trade liberalization to measure the impact of trade liberalization on poverty, and to examine the mechanisms underpinning this impact. Variation in sectoral composition across districts and liberalization intensity across production sectors allows a difference-in-difference approach. Rural districts, in which production sectors more exposed to liberalization were concentrated, experienced slower decline in poverty and lower consumption growth. The impact of liberalization was most pronounced among the least geographically mobile, at the bottom of the income distribution, and in Indian states where inflexible labor laws impeded factor reallocation across sectors.
    Keywords: Fiscal reforms , Income distribution , India , International trade , Nontariff barriers , Poverty , Private consumption , Protectionism , Tariffs , Trade liberalization , Trade policy ,
    Date: 2010–09–22
  8. By: Veeramani C
    Abstract: This paper focuses on two aspects of India’s intra-industry trade (IIT) in manufactured commodities under economic liberalization. First, it examines the changes in the intensity of multilateral IIT as between 1987-88, 1994-95 and 1998-99 to understand the impact of trade liberalisation on IIT. Second, within the theoretical framework of vertical IIT, it analyzes the influence of various country specific factors on the intensity and the probability of IIT in India’s bilateral trade with her major trading partners. The findings confirmed the hypothesis that trade liberalization biases trade expansion towards IIT. [Working Paper No. 313]
    Keywords: India, Liberalisation, Intra-industry trade, country specific factors
    Date: 2010
  9. By: Laszlo Goerke; Markus Pannenberg
    Abstract: In Germany, there is no trade union membership wage premium, while the membership fee amounts to 1% of the gross wage. Therefore, prima facie, there are strong incentives to freeride on the benefits of trade unionism. We establish empirical evidence for a private gain from trade union membership which has hitherto not been documented: in West Germany, union members are less likely to lose their jobs than non-members. In particular, using data from the German Socio-Economic Panel we can show that roughly 50% of the observed raw differential in individual dismissal rates can be explained by the estimated average partial effect of union membership.
    Keywords: free-riding, trade union membership, survey data
    JEL: C H J J
    Date: 2010
  10. By: Bown, Chad P.
    Abstract: This paper examines the evolving, cross-country use of antidumping, safeguard, and countervailing duty policies -- temporary trade barriers (TTBs) -- over the period 1990-2009. The author constructs two new measures of imported products subject to the combined use of these TTBs before applying these measures to new data drawn from the World Bank's Temporary Trade Barriers Database. The research establishes a number of facts regarding trends in historical use to benchmark against policy activity during the global economic crisis of 2008-2009. The 2008-2009 economic shock mostly accentuates patterns and trends already visible in the pre-crisis data: e.g., while the major users of such policies overall combined to increase the product lines subject to TTBs by 25 percent during the crisis, this was driven almost entirely by developing economies which increased their product coverage by 40 percent. On the export side, a previously unidentified feature of the data is that a much larger share of China's exports to other developing economies is subject to foreign-imposed antidumping than its exports to developed economies. The evidence confirms this feature is shared by a number of other major developing economy exporters, deepening concern that these discriminatory trade barriers are increasingly a"South-South"phenomenon.
    Keywords: Currencies and Exchange Rates,Free Trade,Economic Theory&Research,Markets and Market Access,Water and Industry
    Date: 2010–09–01
  11. By: Bruce Blonigen; Benjamin Liebman; Justin Pierce; Wesley Wilson
    Abstract: The steel industry has been protected by a wide variety of trade policies, both tariff- and quota-based, over the past decades. This extensive heterogeneity in trade protection provides the opportunity to examine the well-established theoretical literature predicting nonequivalent effects of tariffs and quotas on domestic firms' market power. Robust to a variety of empirical specifications with U.S. Census data on the population of U.S. steel plants from 1967-2002, we find evidence for significant market power effects for binding quota-based protection, but not for tariff-based protection. There is only weak evidence that antidumping protection increases market power.
    Keywords: Market structure; Nonequivalence of tariffs and quotas; VRAs; Antidumping; Mini-mills
    JEL: F13 F23 L11
    Date: 2010–09
  12. By: Prachi Mishra; Anna Maria Mayda; Rodney D. Ludema
    Abstract: This paper studies the political influence of individual firms on Congressional decisions to suspend tariffs on U.S. imports of intermediate goods. We develop a model in which firms influence the government by transmitting information about the value of protection, via costless messages (cheap-talk) and costly messages (lobbying). We estimate our model using firm-level data on tariff suspension bills and lobbying expenditures from 1999-2006, and find that indeed verbal opposition by import-competing firms, with no lobbying, significantly reduces the probability of a suspension being granted. In addition, lobbying expenditures by proponent and opponent firms sway this probability in opposite directions.
    Keywords: Corporate sector , Economic models , Import tariffs , Imports , Political economy , Tariff structures , Trade policy , United States ,
    Date: 2010–09–13
  13. By: Christopher Gust; Sylvain Leduc; Robert J. Vigfusson
    Abstract: The degree of exchange-rate pass-through to import prices is low. An average passthrough estimate for the 1980s would be roughly 50 percent for the United States implying that, following a 10 percent depreciation of the dollar, a foreign exporter selling to the U.S. market would raise its price in the United States by 5 percent. Moreover, substantial evidence indicates that the degree of pass-through has since declined to about 30 percent. ; Gust, Leduc, and Vigfusson (2010) demonstrate that, in the presence of pricing complementarity, trade integration spurred by lower costs for importers can account for a significant portion of the decline in pass-through. In our framework, pass-through declines solely because of markup adjustments along the intensive margin. ; In this paper, we model how the entry and exit decisions of exporting firms affect passthrough. This is particularly important since the decline in pass-through has occurred as a greater concentration of foreign firms are exporting to the United States. ; We find that the effect of entry on pass-through is quantitatively small and is more than offset by the adjustment of markups that arise only along the intensive margin. Even though entry has a relatively small impact on pass-through, it nevertheless plays an important role in accounting for the secular rise in imports relative to GDP. In particular, our model suggests that over 3/4 of the rise in the U.S. import share since the early 1980s is due to trade in new goods. ; Thus, a key insight of this paper is that adjustment of markups that occur along the intensive margin are quantitatively more important in accounting for secular changes in pass-through than adjustments that occur along the extensive margin.
    Date: 2010
  14. By: Hiller, Sanne (Department of Economics, Aarhus School of Business); Kruse, Robinson (CREATES)
    Abstract: The European integration process has removed barriers to trade within Europe. We analyze which integration step has most profoundly influenced the trending behavior of export openness. We endogenously determine the single most decisive break in the trend, account for strong cross-country heterogeneity and propose a new measure for the strength of trend breaks. Highly open economies gain from both, monetary and real integration. In sharp contrast, less open economies do not benefit from real integration and even suffer from monetary integration. The major milestones for France, Germany, Italy and the Netherlands are the Euro introduction, the Maastricht Treaty, the Exchange Rate Mechanism I and the merge of EFTA and EEC to the European Economic Area, respectively. Our empirical results have important implications for inner-European economic development, as export openness feeds back into growth, unemployment and income convergence.
    Keywords: European Integration; Export Openness; Trends; Structural Breaks
    JEL: C22 F02 F15 F41
    Date: 2010–07–01
  15. By: Konstantins Benkovskis; Ramune Rimgailaite
    Abstract: According to trade theories, the average quantity of exported goods is not the only parameter of export performance – the variety and quality of exports also play an important role. The goal of this paper is to evaluate the variety and quality of exports from the new EU Member States Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia (NMS) in 1999–2009. The analysis is done on the basis of methodology proposed by R. C. Feenstra (1994) and further developed by D. Hummels and P. Klenow (2005), and Ch. Broda and D. E. Weinstein (2006). Although unit values play an important role in defining export quality, the calculations herein take into account also market shares and the level of monopoly power of firms in a particular market. In addition, this study contributes to the existing literature by providing a different way of evaluating the variety assuming that the number of exported brands follows the Poisson distribution. The calculations show that exports from NMSs in 2009 were of lower quality in comparison with German exports: relative quality was ranging between 0.30 and 0.55. It was found that all NMSs significantly increased their average number of brands exported to the EU market; moreover, all NMSs were able to increase the average quality of their exports during the 10-year reference period. Finally, relative quality is much more stable than relative prices, providing evidence that the measure of relative quality developed herein is better than the traditional proxy, i.e. relative export prices, as it does not include relative costs of production but reflects structural factors.
    Keywords: new EU Member States, exports, quality, variety
    JEL: C43 F12 F14 O52
    Date: 2010–08–20
  16. By: Barbara Pistoresi; Alberto Rinaldi
    Abstract: This paper investigates the causal relationship between real export and real GDP in Italy from 1863 to 2004 by using cointegration analysis and causality tests. The outcome suggests that in the period prior to WW1 the growth of the Italian economy led that of exports, while in the post-WW2 period the causal relationship was reversed with the expansion of exports that determined the growth of the Italian economy.
    Keywords: Export led growth hypothesis; unit root tests; cointegration analysis; Granger – causality
    JEL: F43 O11 N1 N7
    Date: 2010–09

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